Donating timeshare attached to mortgage not easy

DEAR BENNY: Regarding timeshare owners, let’s say they owe $45,000 and association dues are $1,000 a year. You have advised they could donate it to several organizations. How do you donate an obligation (mortgage) to anyone?

Owning it debt-free and “donating” it makes sense, but not donating it when you owe $45,000.

Incidentally, I own four timeshares, which I bought on the secondary market for as little as $100 and not more than $1,500 each.

They are a great deal if you use or trade them. I agree that buying timeshares from developers is almost always a stupid action, but there are many good things about timeshares. By trading timeshares through one of the timeshare programs, I have had many weeks in different places.

I am not a timeshare salesman or the representative of any developer. The best source for cheap timeshares is from timeshare homeowners associations where owners have stopped paying their monthly fees and deed the units back to them. Another simple way is a classified ad in the local paper offering to donate a timeshare. — Tom

DEAR TOM: You are correct that it will be difficult to donate a timeshare that has an underlying mortgage.

Actually, from my readers who currently own timeshares, I have been learning that it is difficult to get rid of one regardless of whether there is a mortgage.

You have been lucky with your purchase, and I know that there are many happy timeshare owners. However, I believe you are in the minority; most of my readers are very unhappy and are desperate to rid themselves of that financial burden.

My advice if you happen to have an interest in buying a timeshare: Don’t fall for the representations of the smooth-talking salesman. Get a copy of all documents that you will have to sign and have them carefully reviewed by your attorney. If the salesman says you can’t take the documents with you, as happened to me once when I was doing some hands-on research in this area, just say “Thank you” and walk away.

How does this affect taxes if the money paid comes from someone other than the owner of the home? — Annette

DEAR ANNETTE: To assist readers who may not have seen my earlier column, here’s the situation:

If you make one additional month’s payment annually on your mortgage, you will reduce a 30-year loan down to 22 years.

Why? Because mortgage interest is calculated monthly on the then-outstanding balance. Obviously, the lower that balance, the less interest you have to pay. So, more of your monthly payment goes to pay down principal.

The best approach is to pay one full extra month at the beginning of each year. However, if this is financially difficult, divide your monthly payment by 12, and add that amount to your payment.

But – and this is important – write on your check and on the coupon you send in to your lender that you are making an extra principal payment of XX dollars. Otherwise, you lender’s computer will get confused and those extra funds may just end up somewhere with the lender but not credited to you.

Once the loan has been approved and in place, the lender should not care where the funds are coming from. So if a relative or friend wants to give you additional funds to use to pay down your mortgage, that’s OK.

But keep in mind that there are tax complications for the giver of the gift if the amount is more than $13,000 each year.

However, if you and your spouse own the property, the gift-giver can give you each $13,000 without any tax issues.

Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.